Losing business means losing revenue, which is why it is important to understand the reasons behind lost business. Only by analyzing why business is lost can you begin to create strategies that will help your sales people avoid losing business in the first place. The following common reasons for losing business should be considered as potential causes whenever a deal is not closed.

Current Vendors May Have the Advantage

People tend to gravitate to the familiar, especially when important decisions are involved. Although multiple vendors may be considered for a need, if a prospect has had a positive experience with an organization in the past that organization already has an advantage. Other advantages that current vendors bring to the table that can result in your sales people losing business include:

• Internal contacts. Sales people who have worked with an organization before already have relationships with key decision makers.
• Price advantages. The lowest bidder will not always win a sale, but an organization already doing business with a prospect likely has a better idea of the prospect’s ideal price range
• Value building advantages. Prospects are more likely to discuss their needs openly with sales people with whom they have an established relationship.

Sales people can overcome these disadvantages by asking prospects about the other vendors being considered for a project and addressing any concerns prospects have about doing business with a new organization.

Commoditization of Products and Services

Commoditization occurs when prospects view their options for a product or service from different businesses as being largely the same. This can result in an organization losing business to competitors when a prospect makes a buying decision arbitrarily, believing that there is no differentiation. This reason for losing business is easy for sales people to overcome, however, as prospect education can help prospects understand the value and benefits of buying from you over buying from your competitors.

Not Enough Focus Given to New Business Opportunities

New accounts are the lifeblood of businesses looking to grow. If sales people are not incentivized to create new accounts, sales people may choose to concentrate on established accounts, reducing their lead generation activity and the time available to follow up on incoming leads. Avoid losing business with new accounts by ensuring that your organization:

• Has a compensation plan structured to encourage sales people to pursue and close new accounts
• Follows regular processes for lead generation and follow up to maximize new account opportunities
• Consistently reminds sales people of the importance of building new accounts

Stalled Sales Cycles Lead to No-Decision Outcomes

No-decision outcomes, when the prospect does not decline to buy but also is not willing to take the next step in the sales process, should be categorized as losing business since these outcomes reflect time and resources spent without generating revenue. Coaching your sales people to qualify leads rigorously and work to build relationships with decision makers early in the process can prevent the no decision outcomes that too frequently result in your organization losing business.

Loss of Deal Momentum

Loss of momentum is a common problem that results in sales people losing business. Even in longer sales cycles prospect interest must be maintained in order to keep a deal moving forward; if interest begins to decline, so do the opportunities of making the sale. Ask your sales people to combat this problem early in the sales process by agreeing with prospects on key deadlines that emphasize the importance of time and build urgency into the buying decision.

Although these five reasons for losing business are frequent, there are many other reasons for why sales people lose business. If your organization is not already conducting win/loss analyses by tracking pipeline activities and conducting post-decision interviews with prospects, consider adopting these practices to help your sales people identify the reasons behind losing business and win more business in the process.